Real estate fraud has become the priority of the Spanish General Tax Office in the year 2007. During 2006, several cases of corruption related to real estate affairs have appeared in Spain. The most infamous case happened last year in Marbella (Malaga). A judge investigated the Town Hall and discovered an organized plot from within the very same Town Hall. In this operation more than 20 people were arrested one of whom was the Town Hall’s mayor, although the brain of the operation was the urban development affairs adviser, who is currently in jail. Police found him an immense patrimony. Many housing estates constructed in the Costa del Sol in Malaga and on other parts of the Spanish seashore are illegal, because some Town Halls have allowed construction on land that has not previously been qualified as suitable for it.

However, the real estate fraud operation was not only in Malaga, since there have been known others, for example in Mallorca or in the South of Gran Canaria, etc., etc.

For all these reasons, the government has decided to stop the corruption behind the real estate sector. Spain can not have the luxury of being a society where undeclared earnings are moved around easily. Especially, when considering that the sophisticated mechanisms that the Spanish General Tax Office has, is supposed to be one of the world’s most modern.

Just to have an idea of the amount of money that is invested in the real estate sector in Spain, sales of housing were valued at 160,000 million euros last year, equivalent to 16% of the Spanish GNP. In Spain approximately 450,000 properties are sold yearly between individuals. The General Tax Office knows that many sales are done using incorrect prices on deeds. That is why in 2007, the General Tax Office is going to concentrate 40% of its attention on controlling tax evasion in this sector. Control is going to be established from operations of re-qualification of land to promoters, builders, subcontractors, housing sales transactions between individuals, etc., etc. There will be over 2,000 people dedicated to investigate the sector this year. In 2006, 1994 inspections were done and over 400 million euros were reclaimed. The notaries are now obligated to clearly specify on the sales agreements how the payment is made for the properties: cash, check, transfer, etc..., and if there are inspections at a later time, it should be clarified where that money came from. Furthermore an entity of the Spanish Administration, the Property Register, is running a computer program that estimates housing market values in the main cities and tourist places. This information is compared with appraisals, deeds, press advertisements, internet, etc., and later on, to the prices declared on deeds.

There is also the obligation to indicate the property register account number in all yearly income statements. This measure has forced over 19% of the rental incomes that were not declared before, to have been brought to light. It seems that big construction companies will not be able to play the game of declaring only part of the truth and the tendency will be to declare all the money.

Moreover controls will be instrumented with regards to money laundering, tax havens and the use of 500 euro notes that in Spain, are considered to be too prevalent.

In conclusion, we can say that the government through the General Tax Office has decided to investigate real state operations this year with much closer attention. This includes all aspects from builders, promoters, real estate agencies, subcontractors, jobs related to building, market prices, prices declared on deeds under reality, notaries, etc., etc., so it will be more complicated to escape treasury laws and evade taxes.